Crude Oil Fundamental Analysis September 20, 2013 Forecast

Despite Wednesday’s strong turnaround in the November crude oil market, traders appear to have very little interest in the long side at current price levels. The surprise news by the Fed to refrain from tapering its monthly monetary stimulus this month may have triggered a fast short-covering rally, but investors seem to be focused on the demand picture rather than on what the Fed intends to do with its stimulus program.

Reading between the lines, one may interpret the Fed’s action as a sign the economy is recovering too slowly to warrant any significant shift in its $85 billion per month purchases of government backed securities. Although the initial reaction by investors was to drive interest rates lower as well as the U.S. Dollar, moves that should’ve underpinned crude oil, the main concern is the potential drop in demand because of the sputtering economy.

With the possible attack on Syria by the U.S. off the table, speculators are now factoring in the Fed’s forecast for slower growth into the supply/demand equation. Additionally, the possibility of a government shutdown next month and its effects on the economy are also being considered by oil traders. Everything seems to be pointing to weaker demand which should keep the pressure on crude oil prices. Even if the dollar breaks further, foreign demand is not likely to offset the drop in domestic demand.

FXEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more up to the data analysis and information in our weekly reports.